Retail giants in fresh price war

TESCO will ramp up the pressure on its competitors today with a new price-match campaign, as Britain’s largest supermarket continues its rearguard action to turn itself around.

The retailer’s Price Promise scheme will compare the cost of thousands of products against Asda, Morrisons and Sainsbury and offer a money-off coupon at the till if rivals are cheaper.

Sainsbury responded yesterday saying Tesco was “playing catch up” to its own Brand Match programme launched 18 months ago. But Tesco said its scheme will be the first to match own label products against those of other supermarkets as well as branded items.

Customers must buy at least 10 different products and the maximum shoppers can redeem is £10. “It gives our customers complete confidence that they won’t lose out by shopping at Tesco,” Chris Bush, UK managing director at Tesco, said.

Tesco has been trialling the scheme at its 38 stores in Northern Ireland since June last year and said it had decided to launch nationwide following customers’ positive feedback. It would not comment on the cost of the campaign.

Tesco botched its Price Check scheme, launched in February 2011, when the retailer promised to give customers “double the difference” in vouchers if products they bought in Tesco shops could be found cheaper at Asda.

It was forced to retreat after canny shoppers, aided by consumer websites, started exploiting the scheme.

Price Promise is also Tesco’s biggest offensive on price since its £500m Big Price Drop campaign in autumn 2011, which was widely blamed for the supermarket reporting a dire Christmas and issuing its first profit warning in 20 years in January.

Clive Black, analyst at Shore Capital, welcomed the move at a tough time for Tesco, which has had to bear the brunt of the public reaction to the horsemeat scandal.

The company was recently voted the worst of Britain’s nine major supermarkets for its pricing and store environment in a poll carried out by Which?, the consumer group.

Black said Tesco’s major competitive issue in the UK was not “only about price and value”. “While they are variables that are certainly relevant they also sit alongside brand perception, store service levels, product quality and the attractiveness of its outlets,” he said.

Tesco’s campaign is also likely to put pressure on rival group Morrisons, which is expected to reveal a three per cent drop in fourth quarter like-for-like sales when it reports its full-year results on Thursday.

Jefferies analysts are forecasting pre-tax profits of £876m, down from £935m the previous year. Morrisons has belatedly been buying sites to launch convenience stores and is mulling an online strategy.